Hope for stable interest rates
US stock markets defy geopolitical uncertainty
October 12, 2023, 1:56 a.m
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Wall Street is showing resilience despite ongoing struggles in the Middle East and uncertainties in the global economy. After the publication of the US interest rate protocols, the stock markets closed with slight price gains. But not all industries benefit – dialysis companies are experiencing a fall in share prices.
Wall Street closed with slight gains following the publication of US interest rate reports. The Dow Jones index of standard stocks ended trading 0.2 percent higher at 33,804 points. The technology-heavy Nasdaq advanced 0.7 percent to 13,659 points. The broad S&P 500 gained 0.4 percent to 4,376 points.
The Fed minutes from the September meeting gave investors hope that key interest rates would remain constant. In view of the uncertain economic outlook, the US monetary authorities are keen to pursue a cautious approach to monetary policy. After some sharp interest rate increases in the fight against inflation, the US Federal Reserve (Fed) paused last month.
“A large majority of participants continued to assess the future development of the economy as highly uncertain,” said the minutes of the meeting of the Open Market Committee, which is responsible for interest rate policy. Global commodity markets and a strong real estate market could lead to higher inflation. Tighter financing conditions, the sluggish global economy and recent strikes in the automotive sector also pose threats to growth and employment. This suggests that “caution” should be exercised in determining the extent of additional monetary policy steps.
Analysts were cautiously optimistic. “The massive rise in bond yields in recent weeks has clearly tightened financing conditions,” said Raphael Olszyna-Marzys, an economist at Swiss private bank J Safra Sarasin. “If this tightening continues, the Fed itself will no longer need to raise rates as the market will do its job.” Many investors threw US bonds out of their portfolios last week after the monetary authorities said that further interest rate hikes were not ruled out. In return, the yield reached a 16-year high of 4.887 percent.
Market participants also kept an eye on the economy. The US inflation data, which is important for the Fed, is due on Thursday. According to current figures, producer prices in the USA have now risen more than expected. These prices apply ex works – i.e. before products are further processed or traded. They can therefore be interpreted as an early signal for the development of consumer prices.
The ongoing fighting in the Middle East caused caution among investors. The radical Islamic Palestinian group Hamas triggered the worst escalation in the Middle East conflict in years with a surprise major attack on Israel on Saturday. In view of the geopolitical uncertainty, investors primarily turned to “safe havens” such as government bonds and gold. The prices of ten-year US bonds interrupted their recent decline and rose, the yield fell to 4.5623 percent. The price of gold climbed 0.7 percent to 1,873 US dollars per troy ounce.
Investors hit the sell button on oil. North Sea oil Brent and US oil WTI fell by 1.8 percent and 2.7 percent respectively to 86.05 and 83.68 US dollars per barrel (159 liters). The promise of the oil cartel Opec+ to keep the market stable even if the military escalation in the Middle East escalated eased investors’ supply fears. The individual stocks in the spotlight included Exxon Mobil, which lost 3.6 percent. The oil giant wants to take over its competitor Pioneer Natural Resources. No cash will be involved in the purchase; Pioneer shareholders will receive Exxon shares instead. Exxon is offering $253 per share. Pioneer advanced 1.4 percent to $240.82.
Meanwhile, the shares of the dialysis companies DaVita and Baxter experienced a pitch-black day. The titles fell by almost 17 or a good twelve percent. Positive study results with the diabetes drug Ozempic from the Danish pharmaceutical company Novo Nordisk in kidney patients caused problems for competitors. The shares of US pharmaceutical giant Eli Lilly, which is developing a drug similar to Ozempic, climbed by a good four percent.